With the Dow Jones Industrial Average still hovering near the 20,000 milestone and the Nasdaq resting at a record, the bulls may want to stop and look at a can of WD-40 sitting on a shelf in a local Walmart and ponder their enthusiasm.
Better yet, just spy WD-40's (WDFC) - Get Report fiscal first-quarter results as a possible tell on the lackluster earnings season that could lay ahead this month and derail the market's post-Trump election momentum. On Monday evening, WD-40 -- which hawks its trademark lubricant and various cleaners in retailers around the world -- delivered earnings of 82 cents a share for the three months ended Nov. 30, missing forecasts by a penny. Although WD-40 reiterated its full-year sales and earnings outlooks, it should provide little solace given what the company had to say about its various business segments.
Here are the areas of the concern, which could be indicative of many large multinationals set to report shortly.
Sales in Americas dived 4%: While tepid results in the U.S. persisted due to mixed conditions in the manufacturing sector, it was comments about Latin America that are worthy of greater attention. WD-40 called out an "uncertain business climate which currently exists in Mexico" as a reason for the segment's poor showing. Not too sure about you, but that sounds like a shout out to the impact of the Trump campaign's jawboning on U.S. relations with Mexico. Indeed, it's a statement that is likely to be repeated soon by many companies -- especially if they miss their numbers like WD-40 -- operating in Mexico.
Already, economists in Bloomberg surveys have cut their median forecasts for Mexico's GDP growth in 2017 to 1.7% from an estimate of 2.3% before Donald Trump was elected as U.S. president.
The impact of currency was harsh: Roughly 40% of WD-40's sales are derived from overseas and with the U.S. dollar hovering around 14-year highs it took a penalizing toll on the company. Sales were whacked to the tune of 7% thanks to the relative strength of the dollar. The impact should be a wake-up call to the bulls, who have chosen to bid up equities despite the clear and present danger to multinational sales and earnings from the dollar.
One analyst at Goldman Sachs slapped richly valued large-cap multinationals Procter & Gamble (PG) - Get Report and Coca-Cola (KO) - Get Report with sell ratings in large part to the detriment of the dollar gets it. Unfortunately, most other stock pickers continue to lack commonsense.
- Fun fact: About 31% of the S&P 500's sales are derived from outside the U.S., according to FactSet estimates.
Things weren't much better for WD-40 in Asia's emerging markets such as Indonesia, South Korea, Malaysia and the Philippines perhaps as a result of the same concern as customers in Mexico about the incoming Trump administration (and to a lesser extent, the knock-on effect of rising U.S. interest rates). Meanwhile, sales in Russia plunged 36% even as businesses watched an apparent friend of the country steal the White House.
In the end, JPMorgan Chase (JPM) - Get Report CEO Jamie Dimon could wax poetic all he wants on the strength of the U.S. economy as he did at his firm's health care conference on Monday evening. The reality is that Corporate America had an enormous amount of risk in their business (more than the norm) during the fourth quarter that will likely be reflected in results and initial outlooks for 2017. And leave it to good old WD-40 to conjure up worry about the market's bull run from those that have chosen to pay attention.
Cool Reads From Around the Web
Who knew making dolls was so lucrative?: I caught up with the CEO of toy-maker Funko on the first day of the big ICR Conference on Monday, and came away impressed. The company -- which produces cute whimsical figures based on pop culture's happenings such as Walt Disney's (DIS) - Get ReportStar Wars franchise -- racked up $400 million in sales last year. It sees sales reaching $1 billion in about three to four years. What I see is a potential sale to Hasbro (HAS) - Get Report or Mattel (MAT) - Get Report by Funko's private-equity backers ACON Investments in the not-too-distant future.
More signs the iPhone 8 will be a game changer: Apple (AAPL) - Get Report has allegedly placed orders for stainless steel phone casing, reportedAppleInsider, spurring more speculation the iPhone 8 will have a substantially glass design. From rumors of wireless charging to the removal of the home button, what we do know about the iPhone 8 is that it's likely to be the most expensive iPhone of all-time.
Well-timed, McDonald's: Just in time for Nintendo's big Jan. 11 livestream of the its new console called Switch, McDonald's (MCD) - Get Report will bring back Mario characters to U.K. Happy Meals reportedNintendo Life. Nothing like sucking in little Joey for a fattening meal with a well-placed videogame toy.